What are the most commonly used Incoterms in international ocean freight?

FOB (Free on Board) and CIF (Cost, Insurance, and Freight) remain the most widely used Incoterms for ocean freight globally, especially in Asia and developing markets. However, FCA (Free Carrier) is increasingly recommended for containerized shipments as it better reflects modern container handling processes, while FOB and CIF are more suitable for bulk cargo and traditional commodities.

How do Incoterms affect shipping costs and freight quotes?

Incoterms directly impact shipping costs by defining which party pays for freight, insurance, handling, and customs charges. FOB and EXW quotes typically show lower prices for sellers but transfer more costs to buyers. CIF and DDP quotes appear higher for sellers but include more services. When comparing quotes, always check which Incoterm is being used, as the lowest quote might not include all necessary services or costs.

Which Incoterm offers the best protection for the buyer in sea shipments?

DDP (Delivered Duty Paid) offers buyers the most protection as the seller bears responsibility for the entire shipping journey, including risk, costs, and customs clearance. CIF (Cost, Insurance, Freight) is also favorable for buyers with less international shipping experience, as the seller arranges main carriage and insurance, though risk transfers at origin port. Inexperienced buyers should generally avoid EXW, which places all shipping responsibilities on them.

Do I need cargo insurance if my shipment uses CIF or CIP terms?

Yes, you may still need additional insurance even with CIF or CIP terms. Under CIF, the seller is only required to provide minimum coverage (Institute Cargo Clauses C), which covers basic risks like vessel sinking. CIP requires more comprehensive coverage (Clauses A), but even this may not cover war risks, strikes, or specific cargo needs. Buyers should review the provided insurance certificate and consider supplemental coverage for high-value goods or specific risks.

Which Incoterms work best with Letters of Credit for sea shipments?

CIF and FOB are traditionally the most compatible Incoterms for Letters of Credit in ocean freight. They work well because they have clear documentary requirements and defined handover points that can be evidenced through standard shipping documents like Bills of Lading. CFR is also commonly used with L/Cs. While FCA is increasingly recommended for container shipments, some traditional banks in developing markets still prefer FOB/CIF terms for documentary credit transactions.

What documents are typically required for each Incoterm in ocean freight?

Document requirements vary by Incoterm. For FOB shipments, sellers typically provide commercial invoice, packing list, certificate of origin, and export customs documents. Buyers arrange Bill of Lading and insurance. For CIF, sellers provide all these plus Bill of Lading and insurance certificate. With EXW, sellers provide minimal documentation (commercial invoice), while buyers handle everything else. DDP requires sellers to manage all documentation including import customs. Always specify document requirements in your contract to avoid disputes.

Incoterms Guide

Master international shipping terms with our interactive guide. See exactly where responsibilities transfer between seller and buyer.

Seller

→

Buyer

Risk

Cost

Tasks

Seller's Warehouse

Pre-Carriage

Port of Loading

Ocean Transit

Port of Discharge

Delivery

Buyer's Warehouse

FCA - Free Carrier

Seller delivers goods to buyer's nominated carrier at seller's premises or another named place. Risk transfers when goods are handed over to carrier.

Risk transfers at: Pre-Carriage

Cost transfers at: Pre-Carriage

Tasks transfer at: Pre-Carriage

What Are Incoterms?

Incoterms (International Commercial Terms) are internationally recognized standard trade terms used in domestic and international transactions. They define the responsibilities, costs, and risks between buyers and sellers.

Updated every decade by the International Chamber of Commerce (ICC), the 2020 version clarifies several key aspects of international shipping responsibilities and modernizes terms for container shipping.

Key Changes in 2020 Edition

FCA now allows for on-board Bills of Lading with named port
CIP requires higher level of insurance coverage (Clause A)
DAT renamed to DPU (Delivered at Place Unloaded)
Security-related requirements now explicitly included

Interactive Comparison of Ocean Freight Terms

Select any two Incoterms to compare responsibilities and tasks between buyers and sellers side by side.

First Term

Second Term

Export Packaging

Seller

Export Clearance

Seller

Loading at Origin

Seller

Pre-Carriage

Seller

Origin Terminal Fees

Seller

Loading onto Vessel/Vehicle

Seller

Main Carriage

Buyer

Seller

Insurance

Buyer

Seller

Unloading at Destination

Buyer

Destination Terminal Fees

Buyer

Delivery to Destination

Buyer

Import Clearance

Buyer

Import Duties and Taxes

Buyer

Shipping Journey Timeline

Explore each stage of the shipping process and see who's responsible under different Incoterms

Shipping Journey Timeline

Select a term to see responsibilities during shipping journey:

Sales Contract

Shared

Required Documents:

Sales Contract Both

Purchase Order B

Shipment Preparation

Seller

Required Documents:

Packing List S

Product Specifications S

Transport Booking

Buyer

Required Documents:

Booking Request B

Shipping Instructions B

Pickup from Factory

Seller

Required Documents:

Delivery Order S

Cargo Receipt S

Export Documentation

Seller

Required Documents:

Commercial Invoice S

Packing List S

Certificate of Origin S

Export Customs

Seller

Required Documents:

Export License S

Export Declaration S

AES Filing S

Loading onto Vessel

Seller

Required Documents:

Shipping Instructions S

Mate's Receipt S

Ocean Transit

Buyer

Required Documents:

Bill of Lading B

Insurance Certificate B

Port Arrival

Buyer

Required Documents:

Arrival Notice B

Delivery Order B

Import Customs

Buyer

Required Documents:

Import License B

Import Declaration B

Customs Bond B

Delivery to Destination

Buyer

Required Documents:

Proof of Delivery B

Receipt Confirmation B

Seller's Responsibility

Buyer's Responsibility

Shared Responsibility

S Seller Document

B Buyer Document

Both Shared Document

Free Downloadable Resources

Download our printable reference guides, comparison charts, and checklists

Incoterms 2020 Quick Reference Table

One-page PDF with all terms, responsibilities, and transfer points

PDF 1.2 MB

Incoterms Selection Checklist

Step-by-step guide to choosing the right term for your shipment

PDF 0.8 MB

Cost Responsibility Matrix

Detailed chart of all potential costs and who pays under each term

XLSX 1.5 MB

Incoterms Pocket Guide

Handy reference booklet with key information for each term

PDF 2.4 MB

Incoterms Contract Templates

Sample contract clauses for each Incoterm with recommended wording

DOCX 1.8 MB

Risk Transfer Calculator

Interactive tool to assess risk exposure under different terms

XLSX 1.1 MB

Frequently Asked Questions

Common questions about implementing Incoterms in real-world shipping